Lam Tak Choi v. Chow Tai Fook Jewellery Co Ltd

HCA 2481/2015

[2020] HKCFI 362

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2481 of 2015

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D E C I S I O N

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Background

1.This is an application by the Plaintiff made under Order 14A for determination of the following question of law (as framed in the Summons of 15 January 2019):

“whether the existence of unauthorized building works (if any) and/or the reduction of efficacy in fire escape (if any) caused by the Plaintiff (and former squatter, without any gap in between) in the course of exclusive possession in violation of any provisions, rules or regulations governing fire escape (if any) and/or any provisions of the Buildings Ordinance (Cap 123) (if any) would have prevented or stopped the limitation period from running for the purpose of an adverse possession claim, pursuant to ss 7, 8, 13 and 17 of the Limitation Ordinance (Cap 347)”.

2.If the question of law is answered in the negative, the Plaintiff applies by the same Summons for parts of the Re-amended Defence and Counterclaim (“Defence”) to be struck out under Order 18 r 19, on the ground that they disclose no reasonable defence and/or cause of action.

3.The Plaintiff claims adverse possession of a portion of a property, situated at the bottom of a staircase on the ground level (“Subject Area”) of a building known as 94 Chung On Street, Tsuen Wan, New Territories in Hong Kong (“Building”). One of the defences raised by the Defendant is that the Subject Area is part of the common staircase and fire escape of the Building and the building adjoining it (“Common Staircase”) (paragraph 5 of the Defence), and that the Common Staircase (together with the Plaintiff’s structure and constructions or parts thereof) encroached into the public pedestrian roadway and reduced the efficacy of the Common Staircase as a fire escape for the Building and the adjoining building (Paragraph 2 of the Defence). As such, the Defendant claims (in paragraph 2 of the Defence) that any occupation of the Subject Area cannot constitute adverse possession.

Applicable legal principles 

4.The governing principles for Order 14A applications are well established and are not disputed. As explained in Rockwin Enterprises Limited v Shui Yee Ltd & ors [2003] 3 HKC 174, the Court adopts a three-stage approach and asks:

(1) Whether the question is one of law or construction of a document;

(2) If so, is that question one that should be determined under the Order 14A procedure? In answering that question, the Court will usually have to be satisfied that (i) the Court has all the necessary facts/matters before it in order to determine the question; and that (ii) if the question is so determined, it will determine the entire cause or matter or any issue or claim therein;

(3) If the answer to question 2 is yes, what determination and consequential orders are to be made.

5.Even if the conditions for determination of a question of law under Order 14A are satisfied, the Court retains a residual discretion whether to proceed to make a determination. In this regard, the Court may consider such factors as whether the question was a dominant feature of the case, whether determination of the question might facilitate settlement, and whether a determination would result in a savings of time or costs.

6.In essence, the Plaintiff argued that the question of law identified in the Summons is suitable for determination without trial, and that its determination will decide the entire issue of the alleged illegality of the Plaintiff’s occupation of the Subject Area and that such illegal possession and occupation of the Subject Area cannot amount to adverse possession to defeat the Defendant’s paper title.

7.In particular, the Plaintiff claims that in deciding the question of law, the Court is not tasked with the resolution of any facts. Further expert reports on the illegality alleged will not be necessary, the issues in dispute at trial will be reduced and the costs and time of the parties and of the Court will be saved if the question of law is decided in the negative.

8.In Shell Hong Kong Limited v Yeung Wai Man Kiu Yip Co Ltd (2003) 6 HKCFAR 222, the Court of Final Appeal confirmed that the Order 14A procedure can be invoked not only in respect of questions which finally determine the entire cause or matter, but also questions which finally determine any claim or issue, although the process does not contemplate that trivial matters would be submitted for determination under Order 14A.

9.Paragraph 14A/2/4 of the Hong Kong Civil Procedure 2020 refers to various authorities including (at p344) the judgment of Sir Thomas Bingham MR in E (A Minor) v Dorset CC [1995] 2 AC 663, where he expressed “unease” at deciding questions of legal principle without knowing the full facts. Where the law is not settled but is in a state of development, it is normally inappropriate to decide novel questions on hypothetical facts. The question of law to be determined by the court should be stated or formulated in clear, careful and precise terms, so that there should be no difficulty or obscurity, still less any ambiguity, about what is the question that has to be determined (China Ping An Insurance (Hong Kong) Co Ltd v Tsang Fung Yin Josephine [2012] 2 HKLRD 674, and this is important since the determination will be final.

10.Paragraph 14A/2/4 further sets out authorities to illustrate the point that where there are conflicting allegations of fact, or issues of fact interwoven with the legal issues to be determined, the procedure under Order 14A is not appropriate (Shell Hong Kong Ltd v Yeung Wai Man Kiu Yip Co Ltd, and Townearn Industrial Ltd v Golden Globe Holdings Ltd [2003] 1 HKC 186. There should be no hypothetical or future facts among the facts to be treated as proved or admitted, and still less any fictitious facts, even though they may be admitted in the pleadings. Where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the Court to split the legal and factual determination, for to do so would in effect be to give legal rulings in vacuo, or hypothetical rulings, which the Court will not do.

11.In seeking the Court’s summary determination of the defined question of law in this case, Counsel for the Plaintiff sought reliance on the decision of the Court in Wan Hok Taoist Association v The Incorporated Owners of Nos 88-90 Pan Hoi Street & Another, unreported, HCA 2384/2008, 16 December 2011, where the Court (giving its decision in an undefended case) observed:

“The point here is that if the means of possession of a piece of land or an area – a roof space in this case – is illegal, that will not prevent the possession running adversely, and provided it runs for the requisite period, that would be sufficient to extinguish the legal owner’s title, but on the other hand, where the act of possession itself is illegal, then the policy of the law is to say that the possession and time cannot run against the legal owner.” (Emphases added)

12.The Plaintiff emphasized that his possession and occupation of the Subject Area was not prohibited or illegal under the Buildings Ordinance (“Ordinance”), notwithstanding any alleged contravention of the Buildings Regulations or the Ordinance, as alleged by the Defendant. The encroachment alleged, and the erection of the structure complained of within the Subject Area, were only means of possession of the Subject Area, and do not prevent the possession from running adversely.

13.Counsel for the Plaintiff also sought reliance on Choy Kuen Chi v Tat Fung Enterprises Company Limited, unreported, HCA 915/2011, 20 July 2015, where the Court analysed the underlying public policy for the Ordinance and found that such policy would not be undermined by allowing the squatter to acquire the title of the property possessed.  At paragraphs 75 to 77, Deputy High Court Judge Leung observed:

“75.  Not only does section 14 of the BO not regulate the very possession of the land, it also does not regulate the nature of the possession.  It regulates and monitors the commencement and carrying out of building works.  Such acts are being relied on in establishing the requisite possession with intent in defeating the paper title of the owner of the land, which, unlike Walton, is not the public.

76.  That the squatter is able to defeat the paper title of the owner of the land will not be held against the Government, which, through the BA, retains the authority to demand the demolition of any illegal structures at any time.  The public policy of protecting the safety of the persons being affected by the illegal structures could still be served by the necessary building order issued pursuant to section 24 of the BO, whoever the rightful owner is.  Whilst the situation of compliance with the terms of the New Grant, as mentioned, is uncertain, Choy in defeating the rights of the paper owner of the Lot would still be subject to the rights of the Government, including possible re-entry, under the New Grant.  The grant of remedy to Choy is not an obvious affront to the requirement of public policy behind the restrictions.

77.  The fact is that there is no evidence of any enforcement action by the BA or the Government in connection with the structures erected by Chan and occupied by Choy throughout the decades.  That enforcement action may still be taken does not reinforce a requirement of public policy behind the legal prohibition to deny remedy to the squatter.”

14.On these authorities, Counsel for the Plaintiff urged the Court to allow the determination of the question of law, and to find such question in favor of the Plaintiff. Not only do the Defendant’s complaints of illegality relate to the Plaintiff’s means of possession only, the Government would still be able to take enforcement action in respect of any reduction of efficiency of the fire escape and breach of the building regulations despite the illegality alleged. The Plaintiff claims that the breach of the Regulations does not involve any criminal offence, but the Defendant claims that a breach of section 14(1) of the Ordinance constitutes an offence under section 40(1AA) of the Ordinance.

15.Having carefully considered the submissions made on behalf of the parties, I find that it is not appropriate to determine the question of law summarily. The following are my reasons.

Whether the question of law identified is suitable for O14A determination 

16.Counsel for the Plaintiff argued that the principles on illegality in the context of adverse possession are already summarized in the judgment of DHCJ Leung in Choy Kuen Chi v Tat Fung Enterprises Company Limited, and that these can be applied in the determination in this case. DHCJ Leung indeed set out an extremely helpful summary of the authorities on the impact of illegality in an adverse possession claim:

“(1) There is no general principle of law that acts in breach of public law prohibitions could never lead to acquisition of rights. In the context of adverse possession, there is nothing in the LO to prevent a squatter who had committed a criminal offence in or in the course of taking possession of land from relying on the limitation provisions. Possession is possession.

(2) However, to suggest that the illegality of the means of possession is irrelevant will be an over-simplification of how the law operates in this context. There is the general principle under the maxim ex turpi causa non oritur action.

(3) The general principle that a person should not be granted remedy if he has to rely directly on illegal conduct to succeed, if without more, could not be mechanically applied to the context of adverse possession. It is applied as an instrument of public policy, but not in circumstances where it does not serve the public interest.

(4) The requirement of public policy has to be ascertained by identifying the objective behind the legal prohibition and criminal sanction. Equally important is the context in which the legal prohibition, and thus breach, comes to be considered.

(5) A legal prohibition may make the very act of possession illegal, such as what happened in the cases of R(Smith) and Collins (above). In such cases, the public policy behind the legal prohibition could well be to bar the acquisition of any right over the land by such acts. This may justify the denial of remedy to the squatter, notwithstanding actual possession with intent for the requisite period that would have entitled him to take advantage of the limitation provisions.

(6) A legal prohibition may have nothing to do with possession of the land but the act by which one comes to possess the land. Take the example of the act of breaking into the council flat in Lambeth London Borough Council (above). As mentioned, it was not argued in that case that the act of criminal damage of the padlock would have prevented time from accruing in favour of the squatter. The authors of Jourdan, Adverse Possession (above) believed that such argument would have failed. However, had the prohibited act in question not been confined to criminal damage but the intended illegal entry as well, I would have thought that the subsequent possession would be tainted as part and parcel of the illegal entry. I would be surprised if the public policy behind the criminality of the act would not require the interest of the public to be guarded against such act of illegal entry and occupation by way of breaking-in. The nature and seriousness of such unlawful conduct would afford a good reason for denying the squatter the right to acquire right over the property as a matter of public policy.

(7) The very act of occupying the land may not be illegal, but there are legal restrictions in respect of how the land may be used or what may be done on it.  The requirement of public policy behind such kind of restrictions would be case specific.  In Glamorgan County Council, there was the town planning concern behind the prohibition against use of unoccupied land without permission.  In Walton, there was the concern about protection of the practical ability of the public to enjoy the green without interruption.”

17.However, it may be oversimplification for Counsel to state that the law on the consequences of illegality on a claim of adverse possession is already settled.  As both G Lam, J and Chow J acknowledged in Tsang Foo Keung v Chu Jim Mi Jimmy, unreported, HCA 7140/1995, 12 July 2013 and [2015] 6 HKC 200, the law in this area is not entirely clear, and although the decision of the Court of Final Appeal in Ryder Industries Ltd v Chan Shui Woo (2015) 18 HKCFAR 544 is on foreign illegality and conflict of laws, the obiter remark by the Chief Justice on the proportionality test may lead to further development in future cases on domestic illegality.

18.Despite the changes in the English cases, Hong Kong courts are bound by the decision of the Court of Appeal in Kan Wai Chung v Hau Wun Fai [2015] 5 HKC 585, that Tinsley v Milligan [1994] 1 AC 340 represents the law in Hong Kong. A party will not be able to succeed in a claim if he has to rely on an illegal conduct to establish his claim or defence, but not otherwise.

19.In the context of adverse possession, however, as DHCJ Leung concluded after his analysis of the authorities, the reliance test cannot be mechanically applied. As the learned author of Jourdan, Adverse Possession (2nd edition, para 7-140) commented (and was noted by both Chow, J and DHCJ Leung in Tsang Foo Keung and Choy Kuen Chi):

“There is a general principle that a person should not be granted a remedy where he has to rely directly on unlawful conduct to succeed. However, the law of adverse possession is concerned with rendering lawful conduct which initially constitutes the tort of trespass. Given that, it is not obvious that the principle should apply to prevent the passage of time from barring a claim to possession by the owner of land, simply because the squatter’s conduct is contrary to statutory prohibition as well as constituting a trespass. An alternative approach would be to consider whether the policy behind the statutory prohibition in question would be infringed if a squatter was allowed to rely on acts committed in breach of the prohibition in support of a claim to title by adverse possession. Where the prohibition is connected to protect public rights, and the acquisition of title by adverse possession will have no effect on those rights, it may be that the prohibition should not prevent the squatter’s claim from succeeding.”

20.The Court pointed out in Choy Kuen Chi that if the bar to making title by adverse possession is based on public policy considerations, the nature and seriousness of the unlawful conduct in question would be relevant. In his decision, DHCJ Leung considered the public policy behind the requirements for approval to building works under the Buildings Ordinance and compliance with the Government Lease. 

21.Following the approach adopted by DHCJ Leung (as Counsel for the Plaintiff urged the Court to do), the policy behind the Ordinance will have to be considered together with the context of the breach of the prohibitions thereunder, which context includes the seriousness of the breach, the effect thereof on public safety, etc.

22.On behalf of the Plaintiff, Counsel argued that the Court of Final Appeal already held in Ryder Industries Ltd v Chan Shui Woo that the proportionality test was not appropriate. As such, Counsel contends that it would not be necessary for the Court, in the determination of the question of law identified in this case, to consider such issues as the seriousness of the breach or illegality alleged.  According to the Plaintiff, the fact that the illegality complained of does not involve the Plaintiff’s act of possession itself, but only the means of his possessing the Subject Area, should be sufficient for the Court to dispose of the question of law in favor of the Plaintiff.

23.Ryder was a decision on foreign illegality. In his judgment, the Chief Justice made it clear that it was not necessary to discuss illegality in the domestic context, and that he would leave open any detailed discussion of the applicable principles for a case in which the point arises. The observation made by the Chief Justice, that he was not in favor of applying the proportionality test as the applicable test for illegality - as it suggests some kind of judicial discretion to be exercised, when the question of illegality must be based on firmer principle and policy, was obiter. The Chief Justice also made it clear in his observation that the facts in any given case will inevitably differ. For this reason, and without clearer guidance from the Court of Appeal or the Court of Final Appeal in the context of domestic illegality in adverse possession cases, I cannot regard Ryder as authority to disregard policy considerations in deciding whether all possible breaches of the Ordinance can defeat a squatter’s claim to title by reason of his possession of the property. Counsel for the Plaintiff did not in fact argue that the Court should ignore policy considerations. Mr Lam did refer to the policy and objectives of the Ordinance, and argued that these would not be defeated as the Government would still be able to take enforcement action against the Plaintiff in respect of any established breaches and contravention of the applicable fire safety Regulations. Mr Lam only argued that on the authority of Ryder, the proportionality test is not appropriate such that the seriousness and nature of the breaches need not be considered.

24.Considerations of public policy and the effect of the Plaintiff’s possession of the Subject Area and any illegality arising in this case inevitably requires a full consideration of all the facts and the context: the fact of the Plaintiff’s manner and duration of possession, as well as the nature and extent of the alleged breach of the Ordinance and the relevant regulations made under the Ordinance. When public policies are considered, the Court should not take a blinkered view of only a part of the facts and ignore others. Breach of fire safety regulations is a serious matter, affecting risks to life, limb and property.

25.In this respect, the Reply contains denials and non-admissions of all the breaches alleged in the Defence, although the Plaintiff referred at the hearing and relies on the expert evidence filed, to argue that there is no dispute between the experts that there was non-compliance or breach of the Regulations made under the Ordinance, their difference in opinion being only to the extent or seriousness of the breach.  To state the obvious, facts are to be stated by the factual witnesses themselves, and not the experts. Mr Lam pointed out that the Plaintiff does not dispute the fact of the existence or erection of the structures in the Subject Area.

26.The question of law should not and cannot be decided on assumed facts: on the assumption that the building works were unauthorized, that there was a structure of specified dimensions erected at an assumed time for an assumed period, and that the efficacy of the Common Staircase was hindered and reduced to an assumed extent. The determination of the question of law is final, between the parties. There are no admissions of fact by either the Plaintiff or the Defendant. The Defendant rightly claims that it is entitled to, and the Court should, test the rival evidence on all the disputed and non-admitted matters at trial. I agree that until the Court has the full facts and had the opportunity to consider the full facts against the entire background of the case, it is undesirable to finally and summarily decide the question of law framed in isolation (E (A Minor) v Dorset CC (1995) 2 AC 663). This is particularly so when the Plaintiff seeks, as a result of the determination of the question of law, the striking out of the parts of the Defence which relate to the effect of the illegality on the claim of adverse possession - on the basis that it is clear and obvious that the Defence cannot succeed. 

27.Whilst it may be true that the determination of the question of law sought may resolve the issue of illegality, that is only one of the issues arising from the case. There are other substantive and substantial issues for proof at trial, such as the Plaintiff’s factual possession for the requisite period of time, the animus possidendi, and whether the Plaintiff’s occupation was with the consent of the Defendant as is alleged in the Defence. Discovery and witnesses’ statements have been completed and exchanged.  There will still have to be a lengthy trial of the Plaintiff’s claim. Even on the issue of illegality, the substantial costs have already been incurred by the parties in the instruction of their respective experts, the experts’ compilation of their reports and the joint statements. The Plaintiff says that the parties can save the costs of further expert reports and the costs of the experts’ attendance at trial, which can be shortened. However, in the overall scheme of the trial and the preparation for trial, the costs to be saved by a summary determination of the question of law at this late stage can make little difference.  Bearing in mind the proportion of the costs to be saved by the O14A application sought, it is more costs effective for the parties to proceed to a full trial of all the factual and legal issues at the same time, for the Court’s determination of the substantive issues in one go, and with the benefit of hearing all the factual and expert witnesses on the disputed issues, and the full, detailed submissions by Counsel on all the questions of law raise.

Disposition 

28.The Order 14A application is accordingly dismissed, with an order nisi that the costs of the application are to be borne by the Plaintiff, with certificate for Counsel.

Mr Vincent Lam and Mr Kurt Ng, instructed by Francis Kong & Co, for the plaintiff 

Ms Rachel Lam SC, Mr Justin Lam and Miss Tinny Chan, instructed by Kwok Yih & Chan, for the defendant